Question

Assume you are going to lunch and have a choice of two meals. The first meal would give an increase in marginal utility of 100 with a $25 price. The second meal would give you an increase of only 10 with a $2 price. The third meal will give you an increase of 50 with a $5 price. Which meal should you logically choose ?
A. First
B. Second
C. Third
D. None of the above

Answer 1

Answer: Third meal

Explanation:

Marginal utility is the satisfaction gotten from consuming an extra product(in this case an extra meal at a restaurant).

Based on logic the meal to be chosen is the third because it gives a reasonably high marginal utility for a very affordable price range. The first meal although it gives the highest utility would be very price demanding, which would not be desirable.

Answer 2

Answer:

C) Third

Explanation:

The first meal gives you 4 units of utility for every dollar spent (= 100 utility / $25).

The second meal gives you 5 units of utility for every dollar spent (= 10 utility / $2).

The third meal gives you 10 units of utility for every dollar spent (= 50 / $5). We should choose the meal that provides us with the greatest utility per dollar.